The Workforce Has Changed. Have Your Benefits?
Seven data signals — from record 401(k) hardship withdrawals to the quiet unraveling of unlimited PTO — reveal a workforce in financial stress and a benefits landscape that hasn't kept pace. Here's what HR and Finance leaders need to understand right now.
Every quarter, we comb through HR research, benefits industry reports, and workforce data to surface the trends that matter most for the people leading benefits strategy. This quarter, seven signals emerged — and together, they tell the same story: employees are financially stretched, behaviorally stuck, and looking for benefits that work for their actual lives, not just their retirement decades from now.
TREND 01
Record 401(k) Hardship Withdrawals Signal a Financial Emergency
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6% |
of 401(k) participants took hardship withdrawals in 2025 — nearly double the pre-pandemic average of approximately 2-3%. |
For years, hardship withdrawals were considered an edge case — the financial backstop of last resort. In 2025, they became a mainstream behavior. When one-in-seventeen employees is raiding their retirement savings, you are no longer looking at a financial literacy problem. You are looking at a structural income-versus-expense gap that benefits programs were not designed to address.
The mechanics of a hardship withdrawal make this all the more alarming: employees pulling from their 401(k) before age 59½ face a 10% early withdrawal penalty, plus ordinary income taxes on the entire amount. A $10,000 withdrawal can cost an employee $3,000–$4,000 in taxes and penalties alone — a brutal toll on someone already in financial distress.
Why Traditional Financial Benefits Are Failing This Test
The benefits most organizations offer are built around the premise of future financial security: retirement contributions, HSA balances, long-term disability. These are genuinely valuable. But they do almost nothing for an employee who cannot cover an unexpected $1,500 expense today.
When benefits are designed only for the future, employees in present-day distress have nowhere to turn except their savings — exactly the accounts those benefits were intended to protect .
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PTO EXCHANGE PERSPECTIVE PTO Exchange gives employees access to the financial value of their already-earned PTO without touching their retirement accounts. An employee with 60 hours of accrued PTO can convert a portion into an emergency cash distribution or a direct retirement contribution — using a benefit they've already earned, not savings they spent years building. This is the difference between a financial lifeline and a financial trap. Hardship withdrawals create debt-like damage (taxes, penalties, lost compounding). PTO liquidity creates zero new debt and no compounding loss. |
TREND 02
Hardship Withdrawals Have More Than Doubled Since Pre-Pandemic
In case Trend #1 could be dismissed as an outlier year, Trend #2 puts that hope to rest. The doubling of hardship withdrawals is not a 2025 anomaly — it is the end point of a multi-year trajectory that accelerated through the pandemic and has not stopped.
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~2–3% Historical hardship withdrawal rate (pre-pandemic baseline) |
~6% Current hardship withdrawal rate in 2025 |
68% Workers citing rising cost of living as their top stressor |
The Fidelity and Plan Sponsor Council of America data reveals the underlying driver: 68% of workers report that the rising cost of living is their top stressor. This is not a savings behavior problem. It is a real income problem playing out in benefit utilization data.
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Employees are not failing to plan for the future. They are being consumed by the present. Benefits strategy must close that gap — or watch employees close it themselves with retirement savings. |
The implication for benefits design is direct: organizations that offer only long-horizon benefits are leaving a growing population of employees with no bridge to get to that future. The bridge should be built into the benefit itself.
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CLIENT RESULT | LARGE COMMUNITY HEALTH ORG. |
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$770K contributed to employee 403(b) accounts through PTO Exchange — without a single dollar of additional employer cost. |
TREND 03
Employees With Unlimited PTO Often Take Less Time Off
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10 Days |
Average vacation days taken under unlimited PTO — versus approximately 15 days under traditional accrual plans. A paradox hiding in plain sight. Source: Aggregated research including Gitnux.org, Bnchmrk.com, BusinessInsider.com and HR industry surveys |
Unlimited PTO was introduced with genuinely good intentions: remove administrative burden, signal trust in employees, and eliminate the hoarding psychology that comes from a fixed balance. In practice, it has produced the opposite result on nearly every dimension.
Employees with unlimited PTO take roughly a third fewer vacation days than those with accrued plans. And 42% of unlimited PTO employees take fewer than 10 vacation days annually. That is not flexibility. That is a benefit employees are systematically underusing.
The Psychological Mechanism Behind the Paradox
When PTO has no defined quantity, employees lose the mental anchor that makes taking time off feel acceptable. The uncertainty doesn't liberate people. It paralyzes them. And 55% of employees with unlimited PTO report that guilt prevents them from taking time off — a stunning number for a policy specifically designed to eliminate psychological barriers.
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THE ACCRUAL ADVANTAGE For PTO Exchange, the unlimited PTO trend clarifies the market opportunity precisely. When PTO has no balance, there is nothing to convert, donate, or exchange. The value that PTO Exchange unlocks requires accrual. Accrued PTO gives employees a tangible asset they can direct toward financial goals. The psychological shift: "I have 40 hours of earned value I can use for my student loans" versus an amorphous entitlement to "some time off." When PTO has value, employees treat it like a real benefit. Unlimited PTO removes that value. Structured accrual preserves it — and PTO Exchange empowers employees to receive it on their terms. |
TREND 04
Fear of Career Impact Is the Hidden Driver of PTO Hoarding
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30% |
of employees fear that taking PTO could negatively affect their career — making fear, not workload, the primary barrier to time off. Source: HR Dive / Monster.com; ResumeBuilder.com and Forbes workplace behavioral studies |
The reason employees accumulate large PTO balances isn't that they don't want time off. It's that they're afraid of what taking it will cost them professionally. In high-pressure environments, employees calculate that being seen as "always on" is a career protection strategy.
The result is a phenomenon researchers are calling "quiet vacationing" — where employees technically take PTO but keep working to avoid appearing absent.
Three Problems This Creates for Employers
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Burnout Employees who never disconnect return diminished, not refreshed |
Liability Unused accrued PTO grows as a balance sheet obligation with every raise |
Inequity Fear-driven hoarding concentrates in high-performers, creating retention risk |
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Solving the Psychological Barrier to PTO When employees know their PTO has multiple paths to value — not just "take a week off or lose it" — they feel less pressure to hoard it. An employee who can convert unused hours to a student loan payment or 401(k) contribution no longer faces the impossible choice between "risky time off" and "wasting the benefit." PTO Exchange removes the financial cost of the fear — the most direct lever an HR benefit can pull. When the stakes of not taking time off are lower, more employees will take it. The employee rests, the liability shrinks, and the benefit delivers measurable ROI. |
TREND 05
Financial Stress Is Now the #1 Workforce Concern
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68% |
of workers say the rising cost of living and financial pressure are their top stressors — surpassing workload, leadership, and every other workforce concern. Source: Fidelity Global Workplace Report and SHRM Job Stress, Economic Concerns Spurring Employees to Skip PTO |
Financial wellness has become the defining category in benefits strategy. Nearly seven in ten employees report that financial pressure is their primary concern — cutting across income levels, job categories, industries, and career stages.
The PwC Employee Financial Wellness Survey, the Bank of America Workplace Benefits Report, and Fidelity research all converge: employees are making employment decisions based on whether their employer is meeting their financial wellness expectations.
The Benefit Category That Addresses Today's Stress — Not Tomorrow's
Traditional financial benefits are designed for risk protection and long-term wealth building. Genuinely valuable — but they do not address the employee who cannot get through this month without financial anxiety.
The emerging category is liquid benefit access: earned wage access, emergency savings programs, student loan assistance, and PTO liquidity. These products convert existing compensation into accessible value when employees need it most.
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PTO EXCHANGE VS. EARNED WAGE ACCESS — AN IMPORTANT DISTINCTION Earned Wage Access (EWA) tools have grown in response to this trend. But EWA creates a structurally problematic cycle: employees access wages before payday, receive a smaller paycheck, and are more likely to need another advance next cycle. It is debt-adjacent behavior dressed up as a benefit. PTO Exchange uses already-earned PTO value, not future wages — there is no advance, no reduced paycheck, no debt cycle. Conversions are IRS-compliant and built on patented technology that prevents constructive receipt issues. EWA is a bridge loan over a gap. PTO Exchange is a conversion of an asset the employee already owns. |
TREND 06
Most Employees Use HSAs as Spending Accounts, Not Savings Vehicles
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18% |
of HSA participants invest their balances. The vast majority use HSAs as a short-term spending account, not the triple-tax-advantage vehicle they were designed to be. Source: HSA Bank Employer Survey |
The HSA is, on paper, one of the most powerful tax-advantaged tools in the American benefits landscape. For employees who invest and hold long-term, it functions as a second retirement account.
In practice, 82% of HSA participants treat it as a debit card for healthcare expenses. This is not irrational behavior. It is a rational response to present-day financial pressure. When employees are financially stressed, a $3,000 HSA balance is a tempting source of immediate relief.
What This Tells HR Leaders About Benefits Engagement
The HSA utilization data is not primarily an education problem. Employees understand what HSAs are for. They are choosing to use them differently because their financial reality requires it. Benefits strategy that responds only with better education will not move this number.
What moves this number is reducing the present-day financial pressure that forces employees to cash out long-term vehicles for short-term needs. When employees have a liquid benefit for immediate stress, they are more likely to preserve their long-horizon accounts.
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CLIENT RESULT | FINANCIAL WELLNESS STRATEGY |
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A large U.S. nonprofit healthcare system with more than 35,000 employees implemented PTO Exchange as part of a comprehensive financial wellness strategy. By giving employees a flexible path to convert unused PTO—rather than forcing them toward emergency withdrawals or high-cost loans—the organization saw measurable impact on retention. 61% reduction in turnover among PTO Exchange program users — demonstrating the direct link between financial wellness and employee retention. |
TREND 07
HSA Adoption Is Surging — But Utilization Tells a Different Story
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40M+ HSA participants in the U.S. — a rapidly growing base |
$8,300 Average HSA balance — significant value sitting largely uninvested |
82% of participants not investing — using HSAs as spending accounts |
The two HSA trends describe a revealing pattern: adoption is growing, balances are significant, and yet the overwhelming majority of employees are using these accounts in the way that delivers the least long-term value.
This is not a story about a benefit people don't want. It's about a benefit being consumed by present-day financial pressure.
For HR and Finance leaders, the counterintuitive insight is this: the problem isn't getting employees into HSAs. The problem is that employees aren't financially stable enough to use them optimally.
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PTO EXCHANGE PERSPECTIVE Liquid Benefits and Long-Term Benefits Are Not Competing — They're Complementary The seven trends in this report all point to the same conclusion: benefits designed for long-term financial health are being cannibalized by short-term financial distress. Adding a liquid benefit layer doesn't undermine retirement and HSA participation. It protects it. Employees with a safety valve for immediate stress are far less likely to raid their 401(k), cash out their HSA, or exit the organization for a marginal pay increase. PTO Exchange sits at exactly this layer: IRS-compliant, zero employer cost, and built on an asset — accrued PTO — that organizations are already carrying on their balance sheets. |
CONCLUSION
What This Means for HR Leaders in 2026
The seven data points in this report are not isolated phenomena. They are seven different measurements of the same underlying reality: the benefits gap between what employers offer and what employees actually need has widened significantly.
Employees are raiding retirement accounts because they have no liquid alternative. They are underusing HSAs not from ignorance but from financial pressure. They are hoarding PTO not because they don't want time off but because they're afraid — and because no one has told them their unused PTO has real, convertible financial value.
The strategic opportunity for forward-thinking HR leaders is not to replace existing benefits programs. It is to add the one layer those programs were never designed to provide: a bridge between the compensation employees have already earned and the financial flexibility they need today.
That bridge — built on IRS-compliant PTO liquidity, zero employer cost, and multi-generational financial wellness options — is what PTO Exchange was built to provide. The macro trends of Q1 2026 describe exactly the market this platform was designed for.
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Reduce PTO liability, improve financial wellness, and give employees a benefit they'll actually use — at zero employer cost. |
DATA SOURCES & NOTES
Data sources: CBS News / Vanguard Retirement Report, Fidelity Global Financial Wellness Report, Plan Sponsor Council of America, HSA Bank Employer Survey, HR Dive, Monster.com, Forbes, Gallup, WSJ, BenefitNews.com, Fast Company, Money Wise, Apple.news, USA Today and BLS workforce research. Report prepared by PTO Exchange. March 2026.
Additional Reference Links:
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Published on Mar 20, 2026 by Sam Lieberman
